Published Tue, 09 Jul 2019 10:15:28 -0400 on Seeking Alpha
I have been wondering how one might model high-yield dividend investing for a while. One of the challenges of modeling any aspect of investments is to find relevant data. Sales material rarely reveals the truly relevant information. One needs to know something about historical failures of one kind and another.
In this context, I was pleased to run across the information shown in Figure 1. These data span 20 years, from 1996 to 2015. This is shorter than one might prefer, but does span two recessions and two monster bull markets. This suggests that these data represent a reasonable basis for forecasts.
The figure shows the forecast yield, at which one purchased the stocks, and the realized yield, which is what actually occurred after dividend cuts and other negative events. The realized yield drops significantly below the forecast yield beginning at about 7%.
One can see that overall it makes little sense to seek portfolio yields above the level of 7% for common stocks. One might do so for specific companies, or perhaps specific market sectors, if one believes one has good reason. But one must respect that many have failed in the past while reaching for yield.
Figure 1. Forecast yield and realized yield for the period 1996 to 2015. Source
The Monte Carlo Modeling
The model approach used in this article is Monte Carlo simulations, which I introduced and discussed here. If you have let any investment advisor work up an evaluation for you, or used the web tools... Read more
|Stock name||Last trade||P/E||Earnings/Share||Dividend/Share||Dividend yield|
|SPDR S&P DIVIDEND ETF||103.80||0.0||0.00||2.42||2.36|
Older articles featuring Spdr S&p Dividend Etf (SDY):Dividend Payers A Winning Strategy In A Volatile Equity Market
Why Dividend ETFs, REIT ETFs, And Low-Volatility ETFs Still Work
My K.I.S.S. Dividend Growth Portfolio: 3rd Quarter 2019 Update
Schwab U.S. Dividend Equity ETF: A Great Alternative To SDY
In The Wake Of Ex-Dividend
NOBL: Stick With Dividend Aristocrats As Economic Fears Mount
Dividend Growth Investing For Retirees
Dividend Growth ETF Overlap
FDVV: A High Dividend ETF For A Low Interest Rate Environment
Value And Dividend Fund Performance During Bear Markets